NALLURPALLI UNNIKRISHNAN SRINIVAS,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6(3)(1), BANGALORE

The grounds raised by the assessee are as under:

The assessee has also raised two additional grounds which are as under:

This appeal was filed by the assessee after a delay of 73 days and the assessee has moved an application for condonation of delay along with an affidavit of the assessee and it is submitted in this application that during the relevant period, the assessee was unwell and was suffering from viral fever and due to his illness, the assessee could not file the appeal in time. The assessee has also submitted a medical certificate in this regard. In the course of hearing, it was submitted by learned AR of the assessee that under these facts, this delay should be condoned and the appeal of the assessee should be admitted. Learned DR of the Revenue opposed to the condonation of the delay but still in the facts of the present case, we feel it proper to condone the delay and admit the appeal. We order accordingly and the delay is condoned and the appeal is admitted.

In course of hearing on merit of the appeal, it was submitted by learned AR of the assessee that as per ground Nos.2.1 to 2.4, this is the grievance of the assessee that the AO was not justified in estimating the income of the assessee at Rs.60 lakhs as against the declared business income of Rs.31,14,651/- supported by the audited accounts of the assessee. He also Page 4 of 11 submitted that in ground Nos.3.1 to 3.3, this is the grievance of the assessee that the AO is not justified in making an addition of Rs.107.27 lakhs by holding that the cash deposits of this amount in the Bank in the present year is unexplained cash deposit.

Regarding the first issue in respect of estimation of income from business, learned AR of the assessee submitted that on page 2 of the Assessment Order, the AO has observed that as per the P & L Account filed by the assessee along with return of income, the assessee had shown receipt of hire charges of Rs.7,89,40,086/- and claimed expenses of Rs.6,68,92,563/- under the head “Hire Charges” and there are some other expenses and in this manner, the assessee has shown the net profit of Rs.31,14,651/-. He pointed out that this is further observed by AO that in course of assessment proceedings, assessee was asked to produce the books of accounts, proof for the expenses claimed but in spite of giving several opportunities, the assessee did not produce the books of accounts and other details and on the basis of these observations, the AO rejected the financial statements filed by the assessee and estimated the income of the assessee from business at Rs.60 lakhs. It was his submission that since the books of accounts were audited, the rejection of books of account by the AO and estimation of the income is not justified. Learned DR of the Revenue supported the orders of the authorities below on this issue.

Page 5 of 11 7. We have considered the rival submissions and we find that a clear finding is given by the AO in the Assessment Order that the assessee was asked to produce the books of accounts and proof for the expenses claimed but in spite of this, the assessee has neither produced the books of accounts nor produced the proof for expenses claimed. In para 10 of his order, a categorical finding is given by learned CIT(A) that as per the Assessment Order, the assessee failed to produce the books of accounts despite several opportunities provided by the AO. Before the Tribunal also, this is not the claim of the assessee that even if the matter is restored back to the file of AO, the assessee can produce the books of accounts and the proof for the expenses claimed. Under these facts, we find no reason to interfere in the order of learned CIT(A) and AO on this issue and accordingly, ground Nos.2.1 to 2.4 raised before the Tribunal are rejected.

The next issue i.e., ground Nos.3.1 to 3.3 is in respect of addition made by the AO of Rs.107.27 lakhs by alleging that the cash deposit in the Bank account of the assessee of much amount is unexplained cash deposit. Learned AR of the assessee submitted that both the Additional grounds raised

Regarding merit of this addition also, it was submitted by learned AR of the assessee that on page 3 of the Assessment Order, the AO has observed that as per the information available in the office of the AO, the assessee has made cash deposits to the extent of Rs.107.27 lakhs in the bank accounts held by the assessee and the assessee could not explain the source of such cash deposit and the AO came to the conclusion that this cash deposit in banks is unexplained cash deposits and made addition. In the course of hearing, it was submitted by learned AR of the assessee that on pages 17 to 85 of the Paper Book is the copy of bank statements for the period from 01.04.2011 to 31.03.2012 of the account maintained with Dhanalakshmi Bank Ltd., and similarly on pages 86 to 95 of the Paper Book is the bank account statement for the same period with the account maintained with HDFC Bank Ltd. He

It was his submission that since, both these accounts are disclosed bank accounts and entire cash deposit is in these two accounts only, the entire cash

We have considered the rival submissions and first we decide the additional Ground No. 2. We find that the books are rejected by the AO and income was estimated by him at Rs. 60 Lacs as against the income declared by the assessee at Rs.31,14,651/- and the grounds raised by the assessee being Ground Nos. 2.1 to 2.4 are already rejected by us as per para No. 7 above. It

In the light of the above, there is no substantial question of law that arises for consideration and the findings of the Tribunal cannot be said to be perverse, as the reasons assigned by the Tribunal are certainly acceptable and do not warrant interference. Consequently, the appeals are dismissed.”

We find that in that case also, it was found by Hon’ble Karnataka High Court that books of accounts were rejected by the AO and it was held by Hon’ble Karnataka High Court that the same books of accounts cannot be relied upon for making another addition on account of trade creditors or arriving at the closing stock. We find force in this argument of the learned AR of the assessee that by the same logic, in the present case also, the same rejected books of accounts cannot be relied upon for making this addition of Page 10 of 11 Rs.107.27 lakhs by alleging that the cash deposit in the Bank account of the assessee of this much amount is unexplained cash deposit. Respectfully following this judgment, we delete this addition.

For the sake of completeness, we examine and decide about this addition on factual aspect also. We find that there is no dispute that the books of accounts of the assessee are audited books and as per audited balance sheet on page 4 of the Paper Book, there is cash at bank of Rs.5,31,699/- as on 31.03.2012 and there is cash in hand on this date of Rs.43,355/-. On page 6 of the Paper Book is the summary of this cash at bank available on 31.03.2012 of Rs.5,31,699/- and as per the same, there was a balance of Rs.5,905/- with Dhanalakshmi Bank Ltd. Account No.03734 and a balance of Rs.5,22,768 with Dhanalakshmi Bank Ltd. Account No.01112 and there was a balance of Rs.3026/- with HDFC Bank Ltd., Bengaluru. As per the summary of cash deposit in these bank accounts submitted by learned AR of the assessee, it is seen that the total cash deposits of Rs.107.27 lakhs is in these two declared bank accounts only being Dhanalakshmi Bank Ltd. Account No.01112 and HDFC Bank Ltd., Bengaluru and the source of the same is explained being out of cash sales of 61,84,302/- and cash withdrawal from these two banks Rs.78,57,380/- and the total of these two comes to Rs. 1,40,41,682/- and even after cash deposit of Rs.107.27 lakhs, it leaves enough cash for other cash expenditures / payments and the closing cash balance as on 31.03.2012.

In the result, the assessee’s appeal is partly allowed.